Is there a catch to retirement village investing?

Hi all,

I'm new to this forum so I hope this is the right place to ask.

In my (relatively) local area there are a number of cheap (~$100k) one bedroom units up for sale in retirement villages and over 55s complexes. The rent seems good and reliable, but if they're such a good investment why are there so many people trying to sell right now?

I realise the on-site managers and facilities mean high fees, so are these places really not that great investment-wise?

Any thoughts would be much appreciated!
 
yes in a word!!

Hi, we invested in a retirement village unit development which has gone very pear shaped. We bought off the plan. We have only ever had 1 tenant in almost 2 years of ownership, he stayed for 10 mths and then left due to health issues. A couple of issues with them, firstly they are usually small and banks are not so keen to lend money for them, 2nd they are very limited in the tenants you can have, ie. over 55's. A problem we have encountered is the loss of health issues with older people who need to move on to more high care accomm. Also you need to really check out your manager as this can really make or break you. Ours has been ok though not great. The strata fees are exhorbinant also. You need to know that the demand is there also for the units, in our local area there are a lot of empty units at present with investors desperate to rent them out for any price. We have decided to bail but have had to sell for less than what we paid to try to get out.
Be very careful!!!!
 
Normally "the deal" regarding fees, re-sale pricing etc. is very, very much in favour of the operator of the complex. We have a close relative who bought into a Noosa complex quite a few years ago. It has been a terrible investment compared to ANYTHING else in Noosa. I wouldn't touch them. No way.
LL
 
Limited pool of prospective tenants.
Tenants tend to have a limited income, thus potentially capping your rent.
Limited buyers if you want to sell.
High management fees.
Restrictive management agreements.

On top of that, your tenants are more likely to get sick or die!
 
Check with the village.
Some restrict rentals.
Marg

is there a catch?

yes the purchaser is the "catch" :D

bit like serviced apartments and student accommodation, throw out some rental returns, depreciation and 'cheap" price as bait and see if any suckers jump on the line!
 
You only need to ask yourself one question.....

Is your rental return the highest priority on the Tenants mind ??

If you reckon the answer is yes, I'd jump on 'em. If you reckon not, then don't touch 'em.

I reckon if you asked the Tenant, or in alot of cases the Tenant's children, I reckon the priority would be ;

  • The comfort of the person
  • The mental well being of the person
  • The closeness to medical facilities
  • The closeness to adult children
  • Safety concerns
  • Nice gardens
  • Community feeling
  • Freindly neighbours
  • Security of the complex, especially at night

I don't see "must pay Landlord their rent" anywhere in that list...
 
You only need to ask yourself one question.....

Is your rental return the highest priority on the Tenants mind ??

If you reckon the answer is yes, I'd jump on 'em. If you reckon not, then don't touch 'em.

I reckon if you asked the Tenant, or in alot of cases the Tenant's children, I reckon the priority would be ;

  • The comfort of the person
  • The mental well being of the person
  • The closeness to medical facilities
  • The closeness to adult children
  • Safety concerns
  • Nice gardens
  • Community feeling
  • Freindly neighbours
  • Security of the complex, especially at night

I don't see "must pay Landlord their rent" anywhere in that list...

Whereas if it was a commercial tenant, running a profitable business and earning his livelihood then not paying rent can result in being locked out of the premises by the landlord. Thereby losing their livelihood. So paying the landlord their rents on time is one of the top priority.

I am sure Dazz can add much more here as to why it is extremely important for profitable business to meet almost all the demands of the landlord!

Cheers,
Oracle.
 
are these places really not that great investment-wise?


Forget commercial, that's not relevant to the discussion.


What is relevant is the OP's question.


I gather from the question, they don't give a rats about the Tenant well being, and are simply perusing the box, both for it's capital growth opportunity and it's ability as a box to produce income.


I gather from experience, that the OP will need to very much disregard those two fundamental ideals of investing, and start fawning over the myriad other baggage that comes with buying that type of box.


I wouldn't touch it with your 10' barge pole.
 
Hi Vorti

Can u use cash to buy them , or maybe live with a 50 % lvr ?

Finance is one the bigger challenges with this style of stock, hence severly limitng resale to other investors

ta
rolf
 
Its good to see that everyone is "on the money" here with their comments about these particular retirement villages!

My main concern is that the secondary market for these units does not exist - real estate agents will not touch them because the commission is too low, so they tend to stay on the market for a very long time.

However!

There are very few retirement living options these days in that price range, particularly as a freehold property, and now that the managers have unwound the Managed Investment Schemes it is possible for owner-occupiers to buy them (previously they really couldn't do this).

If you are keen, the strategy here is to buy a unit, renovate it and sell of to a new owner-occupier. Yes, it is higher risk, but the returns are there because you can reno these for under $10k and get a good uplift when you re-sell.

Definitely not a hold strategy for all of the reasons outlined in this thread!

Hope this helps!

Richard
 
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Thanks everyone for the detailed replies! It certainly sounds like they won't suit my current investment style (particularly as I'm relying on 95% LVR at the moment) and having to worry about the tenant's wellbeing is something I could do without!

Very interesting to hear exactly *why* they are risky though, many of those issues had never crossed my mind so thanks again everyone!
 
we have two retirement units, in a duplex, have had them since 2004. We paid $160K for both, they have been bank valued (mid 2009) at $210K, so capital growth maybe not as good as 'normal' residential units.
The reason we have hung onto them, is they have had 100% occupancy since we purchased (same original tenants), they are positive cash flow, the rent is paid on time every month, I think it comes directly from the govt and includes rent assistance to the PM, and we get a rise with the pension increase each year, I think it is CPI or 4.5% whichever is the higher of the two. We have had minimal expenses with them, apart from body corp and rates, the tenants aren't party animals, and they don't ask for much (lounge room carpet was replaced in one unit last year).
I know they aren't everyone's cup of tea, but we are pretty happy with how ours are going, wouldn't buy any more, one duplex is enough, but they serve their purpose. This is the only property we have where we pay P&I, so the loan is coming down, and value is slowly going up.
 
great thread...
my family and i were also considering investing in a unit in a retirement village.
something like one of these.

we are not really that concerned about capital growth as we thought it could stay in the family.
 
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